Hungary ad tax to impact RTL profits

RTL Group, the European entertainment network, has conducted a first assessment of the financial impacts of the Advertisement Tax Act which was approved by the Hungarian parliament on June 11th 2014. The law as amended is expected to become effective in the course of August 2014 and to require first payments by RTL Hungary later in August.

The new tax will be progressive, with the top 40 per cent levy imposed on annual advertising revenue of more than 20 billion Hungarian forints (about €65 million). RTL Hungary is currently the country’s only media company to be taxed with this top 40 per cent rate.

Following its preliminary assessment, based on the amended Act, RTL Group’s tax charge would increase by approximately €15 million on a full-year basis. In 2013, RTL Hungary generated an EBITA of €15 million on revenue of €100 million.

As part of the normal closing process, RTL Group will also perform an impairment test on the goodwill of RTL Hungary for the Group’s 2014 half-year results. The amount of this impairment is currently being assessed, and the results of this impairment test will be disclosed on 21 August 2014, alongside RTL Group’s 2014 half-year results.

A joint statement by Anke Schäferkordt and Guillaume de Posch, Co-CEOs of RTL Group reads: “Operationally, RTL Group continues to perform strongly in 2014. However, our first assessment shows the severe impact of the new advertising tax in Hungary: it will force RTL Hungary in a structurally loss-making position and will also reduce RTL Group’s net profit in 2014. Since 1997, RTL Group has consistently built up a very valuable asset in Hungary, employing more than 350 people and investing in local entertainment and independent news reporting. And we have paid significant amounts of taxes in Hungary. We are determined to pursue all options to protect our asset against this confiscatory tax. Our announcement today sends an alarming signal for all international investors in Hungary. We thus call on the Hungarian government, again, to revise this counter-productive tax policy seemingly specifically aiming at RTL, as it undermines its operations and raises major concerns about the freedom of journalism in Hungary.”